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The state of Illinois has lost a lawsuit against the state’s attempt to collect sales tax from out-of-state, online retailers — a law often called the “Amazon tax.”

The Performance Marketing Association, which represents affiliate marketers such as those working with Amazon, had challenged the 2011 law that created the  Illinois Affiliate Nexus Tax. A Cook County Circuit judge ruled the law unconstitutional because, according to Crain’s Chicago Business, “simply having an affiliated company in the state that makes sales or refers customers to an online retailer doesn’t create enough of a presence, or nexus, for tax purposes.”

The judge also said the law was unenforceable because of a federal Internet tax moratorium that is in place through 2014.

Crain’s reports the law caused several Amazon.com affiliates to relocate to neighboring states. Executive Director Rebecca Madigan of the PMA, which brought the suit on behalf of affiliate marketers, said in a statement, ““We are thrilled with the outcome of today’s proceeding and believe it paves the way for internet marketing affiliates to get back in business in Illinois.”

The state says it loses about $169 million in potential tax revenue each year.

[via Mashable]

Previously: Amazon.com, Nevada reach agreement on sales tax collection

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